Swiss economist Mr Schwab, speaking on the eve of the elite annual gathering in the Swiss mountain resort of Davos, called for business and government leaders to focus on "cautious realism" and a recovery of public trust to avoid another major financial crisis.

"The problems and the risks have not gone away," he said in an interview with the Associated Press. "The world economy may still confront a collapse if very negative constellations occur."

Markets started strongly this year, with many stock indexes near multi-year highs, and the euro currency union no longer seems in danger of breaking apart. The world's central banks have flooded financial systems with new money.

But unemployment remains high in many developed economies and the public's faith in business and government leaders is falling. The euro alliance and Japan are in recessions. And politicians in the United States, the world's biggest economy, are struggling to finalize a budget deal to avoid a potential default that would cause havoc in financial markets. Even if the U.S. does reach a deal, as expected, it could include big government spending cuts that would hurt the global economy.

Mr Schwab's World Economic Forum this week is expected to draw more than 2,500 of the world's financial and political elite. Organizers, journalists, political aides and others began streaming in by train and car Monday as a steady snowfall coated the region.